RISKY INVESTMENT

The German Business Stake in Qatar

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The family of the Qatari emir, Tamim bin Hamad al-Thani, has significant investments in Germany. Picture source: Reuters

Leading German companies are stuck in the middle of an escalating conflict between Arab states, after Saudi Arabia and its allies cut ties with Qatar, a major investor in Germany.

Volkswagen, Deutsche Bank and Siemens, which all list Qatar as a shareholder, as well as railway operator Deutsche Bahn, which is highly active in Doha, all said they were watching the situation and developments in the Gulf region.

Mr. Gabriel, during a joint press conference with his Saudi colleague, said Berlin would support all measures that contribute to de-escalation.

One of the world’s largest liquid natural gas (LNG) producers, Qatar has plowed its windfall into domestic infrastructure projects and foreign investments. German companies have long profited from the wealthy emirate’s spending spree. Doha has invested between €30 and €35 billion in Germany, second only to Britain in Europe.

Deutsche Bank, in particular, has benefited from Qatar’s largesse. Germany’s biggest financial institution lists the emirate’s ruling al-Thani family as its second-largest shareholder. The al-Thani’s stood by Deutsche Bank during its latest financial crisis, when they agreed to shore up the bank with another capital increase, heading off the need for a state bailout. Qatar’s royals were rewarded with a seat on Deutsche Bank’s supervisory board in May.

Deutsche Bank now faces a difficult balancing act in the region. An institutional investor said there are concerns that the other Gulf states might avoid doing business with Deutsche Bank due to its close relationship with Qatar.

“The topic indeed is of quite an explosive nature and could turn into a problem for Deutsche Bank if the situation continues to escalate,” the investor, who declined to be named, told Handelsblatt.

As German companies monitor the tense situation in the Gulf, Foreign Minister Sigmar Gabriel has slammed the Saudis and their Gulf Arab and Egyptian allies for severing ties with Qatar. Mr. Gabriel derided the move as a “Trumpization” of relations and warned against further escalation in a region he described as “a political and a military powder keg.”

Despite his heated rhetoric, Mr. Gabriel has emerged as a mediator in the crisis. He hosted Saudi Foreign Minister Adel Al-Jubeir in Berlin on Wednesday and will meet his Qatari counterpart Mohammed al-Thani on Friday. Mr. Gabriel, during a joint press conference with his Saudi colleague, said Berlin would support all measures that contribute to de-escalation.

The German foreign minister said Berlin has a major interest in ensuring that the coalition fighting the Islamic State group remains united. Both Saudi Arabia and Qatar participate in the coalition, but Riyadh has accused Doha of supporting Islamic extremists, a charge Doha denies.

During the meeting in Berlin, Saudi Foreign Minister Al-Jubeir said relations with Qatar would return to normal only when Doha agrees to its demands, which include ending support for the Palestinian militant group Hamas and the Muslim Brotherhood.

For German companies, a return to normal in the Gulf cannot come soon enough. Just four weeks ago, engineering giant Siemens was awarded a contract by Qatar to build 35 transformer stations for electricity at a cost of €790 million. Despite the political crisis, Siemens said business with Qatar would continue and it would fulfill all contracts. Doha owns a 3.3-percent stake in Siemens, which in turn has €2.5 billion worth of contracts in the emirate.

A representative of a German company in Doha, who spoke on condition of anonymity, said business has not yet been affected by the crisis, but political pressure is mounting.

As with Deutsche Bank, the political situation for Siemens could prove difficult. The engineering company has significant business interests in Qatar’s rivals – Saudi Arabia, Egypt and the United Arab Emirates (UEA). Siemens is building gas turbines, worth billions, in Egypt and Saudi Arabia. In the UAE, the company is installing smart-building technology for the Expo 2020 in Dubai.

A representative of a German company in Doha, who spoke on condition of anonymity, said business has not yet been affected by the crisis, but political pressure is mounting. Saudi Arabia and the UAE are already pushing companies to invest in their economies instead of Qatar and Iran, the source said.

For the container shipping company Hapag-Lloyd, the conflict between the Gulf Arab states could literally play out in its boardroom. Saudi Arabia and Qatar became major shareholders in the Hamburg-based company in the wake of its recent merger with the United Arab Shipping Company. Qatar is Hapag-Lloyd’s largest shareholder with a 14.4 percent stake, while Saudi Arabia along with Bahrain and the United Arab Emirates holds a 13.7 percent stake.

Both Qatari and Saudi representatives have seats on Hapag-Lloyd’s non-executive supervisory board, which is responsible for hiring and firing CEOs and overseeing corporate strategy. The shipping company is in the middle of planning a $400-million capital increase. The Qataris, the Saudis and Klaus Michael Kühne, another major shareholder, have all said the increase should go through by the end of November. It’s unclear whether or not the situation in the Gulf will set back those plans. Hapag-Lloyd, for its part, has declined to comment on the situation.

Spencer Kimball is an editor with Handelsblatt Global in the United States. Mathias Brüggmann is the head of Handelsblatt’s foreign affairs desk. Yasmin Osman is a financial editor with Handelsblatt’s banking team in Frankfurt. WirtschaftsWoche, a Handelsblatt sister publication, contributed to this article. To contact the authors: s.kimball@extern.handelsblatt.com, osman@handelsblatt.com, brueggmann@handelsblatt.com

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